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Journal Publications

  [1] Procyclicality of the Comovement between Dividend Growth and Consumption Growth

       Journal of Financial Economics, Volume 139, Issue 1, January 2021, Pages 288-312


Duffee (2005) shows that the amount of consumption risk (i.e., the conditional covariance between market returns and consumption growth) is procyclical. In light of this "Duffee Puzzle", I empirically demonstrate that the conditional covariance between dividend growth (i.e., the immediate cash flow part of market returns) and consumption growth is (1) procyclical and (2) a consistent source of procyclicality in the puzzle. Moreover, I solve an external habit formation model that incorporates realistic joint dynamics of dividend growth and consumption growth. The procyclical dividend-consumption comovement entails two new procyclical terms in the amount of consumption risk via cash flow and valuation channels, respectively. These two procyclical terms play an important role in generating a realistic magnitude of consumption risk. In contrast to extant habit formation models, the conditional equity premium no longer increases monotonically when a negative consumption shock arrives because it might lower the amount of risk while increasing the price of risk.

◘ Paper Online Appendix Published Version (2021/01)  bib

◘◘ 2018 E(astern)FA (2018/04), 2018 MFA (2018/03), 2017 SoFiE Conference (main conference), New York (2017/06), Federal Reserve Bank of New York, New York (2017/06), 2017 AEA/AFA/ASSA (poster presentation), Chicago (2017/01), 28th Australasian Finance and Banking Conference (AFBC), Ph.D. Forum (2015/12), 28th AFBC, Asset Pricing II (2015/12), Ph.D. Seminar, Columbia Business School (2015/11), 15th Transatlantic Doctoral Conference, London Business School (2015/05), Third-year paper presentation, Columbia Business School (2015/01)

◘◘◘ winner of 28th AFBC 2nd best paper at the Ph.D. Forum (2015/12)

  [2] The Time Variation in Risk Appetite and Uncertainty 

      (with Geert Bekaert and Eric Engstrom)

        Management Science, Vol. 68, No. 6, June 2022, pp. 3975–4004 (Lead Article)

We formulate a dynamic no-arbitrage asset pricing model for equities and corporate bonds, featuring time variation in both risk aversion and economic uncertainty. The joint dynamics among cash flows, macroeconomic fundamentals and risk aversion accommodate both heteroskedasticity and non-Gaussianity. The model delivers measures of risk aversion and uncertainty at the daily frequency. We verify that equity variance risk premiums are very informative about risk aversion, whereas credit spreads and corporate bond volatility are highly correlated with economic uncertainty. Our model-implied risk premiums outperform standard instruments for predicting asset excess returns. Risk aversion is substantially correlated with consumer confidence measures, and in early 2020 reacted more strongly to new Covid cases than did an uncertainty proxy.


Published Version [2021/10]  Paper   Online Appendix    Download Index  NBER WP (2019/03)   bib

◘◘ Chicago Fed seminar (2020/06), 8th HEC-McGill Winter Finance Workshop (2020/03), 9th ITAM Finance Conference (2020/02), 2019 EFA (2019/08)2019 CICF (2019/07), 2019 EFMA (2019/06)2019 FIRS (2019/05)15th European Winter Finance Summit (2019/03)2019 MFA (2019/03)2019 AFA (2019/01), 31st Australasian Finance and Banking Conference, Sydney (2018/12), 2018 CIRF (2018/12)University of Zurich (2018/12), University of Luxembourg (2018/12)2018 NFA (2018/09), "Machine Learning and Finance: The New Empirical Asset Pricing" hosted by University of Chicago Booth (2018/07), 2018 North American Summer Meeting of the Econometric Society (2018/06), 11th Annual SoFiE Conference (2018/06), Baruch College (2018/05)Federal Reserve Board's Conference on Risk, Uncertainty, and Volatility (2018/04), Columbia Women in Economics (2018/03), Columbia Business School (2018/03)

◘◘◘ Media: Informs Blog (2022/08) Nanyang Business School Forum (blog) (2018/12)VOX CEPR Policy Portal (2018/03)

◘◘◘◘ winner of Global association of research professionals (GARP) research excellence award, China International Risk Forum (2018/12)

  [3] The Global Determinants of International Equity Risk Premiums

         previously titled: Variance Risk Premium Components and International Stock Return Predictability

        (with Juan M. Londono)

       Management Science,  forthcoming

We examine the commonalities in international equity risk premiums by linking empirical evidence for the ability of U.S. downside and upside variance risk premiums (DVP and UVP, respectively) to predict international stock returns with implications from an empirical model featuring asymmetric economic uncertainty and risk aversion. We find that DVP and UVP predict international stock returns through U.S. bad and good macroeconomic uncertainties, respectively. 60% to 80% of the dynamics of the global equity risk premium for horizons under seven months are driven by economic uncertainty, whereas risk aversion appears more relevant for longer horizons. The predictability patterns of DVP and UVP vary across countries depending on those countries’ financial and economic exposure to global shocks. In those with higher economic exposure, investors demand higher compensation for bad macroeconomic uncertainty but lower compensation for good macroeconomic uncertainty, whereas the compensation for bad macroeconomic uncertainty is lower for countries with high financial exposure.

Published version [2023/11]  Paper     Online Appendix    FedResearch   bib

◘◘ 2021 AEA (2021/01), IFABS 2019 Medellín Conference (2019/12), Stanford SITE "Session 7: Asset Pricing Theory" (2019/08)NASMES Summer Meeting (2019/06), ECWFC@WFA (2019/06), FMA Global Conference in Latin America (2019/05)E(astern)FA 2019 (2019/05)MFA 2019 (2019/03)Federal Reserve Board (2019/03)Econometric Society European winter meeting 2018 (2018/12), 2018 CIRF (2018/12), Boston Macro Juniors Workshop (2018/11)Boston College Carroll (2018/11) 

◘◘◘ Semifinalist, 2019 FMA Global Conference Best Paper Awards

Working Papers

 [4] Local Monetary Policy

(with Slava Fos, Tommaso Tamburelli)

When Federal Reserve districts experience high inflation but lack voting rights to influence FOMC decisions, Federal Reserve Banks reduce the amount of credit extended via the discount window (DW). The identification strategy is based on the exogenous rotation of voting rights among Reserve Banks and on within borrower-time and district-time variations in DW loans and Federal Home Loan Bank (FHLB) loans, implying that factors related to changes in local demand for credit or changes in borrower characteristics cannot drive the results. Our findings suggest the existence of local monetary policy (LMP) executed by the Federal Reserve Banks.

Paper [NEW 2024/03]     bib

◘◘ Boston College brownbag (2023/11), Federal Reserve Bank of Kansas City (2024/04), Temple University (2024/04)

  [5] Main Street's Pain, Wall Street's Gain

(with Yang You)

       Revise and Resubmit, Journal of Financial Economics

We propose a fiscal policy expectations mechanism. When bad macro news arrives (e.g., initial jobless claims or IJC are higher than expected), investors may expect more generous government support and drive up aggregate stock prices through the expected cash flow channel. Using a time-series sample from January 2013 to March 2021, we find that this phenomenon indeed emerges when newspapers mention fiscal policy more. Using a specific sample where fiscal policy debates were unprecedentedly active (early 2020-March 2021), we find that firms that are expected to receive more fiscal support exhibit higher individual stock returns when bad IJC shocks arrive.

◘ Paper [Updated! 2024/01] NBER SI Asset Pricing presentation[SLIDES / VIDEO]    bib

◘◘ 2023 CEPR Paris Symposium (scheduled), University of Kentucky Finance Conference (2023/04), MFA 2023 (2023/03), USC Marshall Finance Seminar (2023/02), UCSD Rady (2023/01)AFA 2023 (2023/01), Chicago Booth Asset Pricing Conference (2022/12), Cornell University (2022/12), University of Rochester Simon (2022/11)Junior Finance Conference @ Indiana University (2022/09), Stanford SITE ``The Macroeconomics of Uncertainty and Volatility'' (2022/09)Stanford SITE ``New Frontiers in Asset Pricing'' (2022/07), NBER Summer Institute Asset Pricing (2022/07), UNC Kenan-Flager (2022/09), UW Foster (2022/09), USC Marshall Macrofinance Reading Group (scheduled), CICF (2022/06), Asian Finance Association annual meeting (2022/06), Hong Kong Poly U (2022/05), Green Line Macro Meeting (2022/4), Boston College (2021/11), University of Connecticut (2021/11), University of Cincinnati (2021/11), University of Birmingham (2021/11), 4th Annual Columbia Women in Economics Conference (2021/10) 


  [6] Do the Voting Rights of Federal Reserve Bank Presidents Matter?

        (with Slava Fos)


Voting seats at FOMC meetings rotate exogenously among Reserve Bank presidents on a yearly basis. Using detailed data on 472 FOMC meetings that took place between 1969 and 2019, we show that when there is a substantial dispersion in inflation across districts, inflation in Reserve Bank presidents' districts affects Federal funds target rates only when those presidents hold voting seats at FOMC meetings. The economic conditions in voting districts are a source of monetary policy shocks, affect Taylor rule regressions, and have a profound effect on financial markets. The path of the target rate would have been different if the economic conditions in all districts affected FOMC decisions.

◘ Paper [06/2024]    bib

◘◘ 2024 WFA (scheduled), University of Hong Kong (2023/10), Tsinghua University PBC (2023/10), WAPFIN @ Stern (2023/09)2023 NFA (2023/09), 2023 SITE (2023/09), 2023 European Summer Symposium in Financial Markets (ESSFM) CEPR (2023/07), Zhejiang University (2023/07), ZUFE (2023/06), CUFE (2023/06), 13th NYU-LawFin/SAFE-ESCP BS Law & Banking/Finance Conference (2023/06), New York Fed (2023/05), UCLA Fink Center Conference (2023/04), Alliance Manchester Business School (2023/03), Lancaster University Management School (2023/03), Northeastern University Finance (2023/02), Columbia University (2022/10), the University of Massachusetts Amherst (2022/10), Carnegie Mellon University (2022/09), Boston College (2022/09)


  [7] Risk Aversion Spillover: Evidence from Financial Markets and Controlled Experiments

(with Xing Huang)

       Reject and Resubmit, Journal of Financial Economics

We study risk aversion (RA) spillover from the US to several major developed economies. Using daily financial market and news data, we identify US RA events and show that the international pass-through of US high RA events is significantly higher (61%) than that of US low RA events (43%), capturing asymmetric spillover. We replicate these findings in controlled experiments where non-US subjects were primed with scenarios of US RA events. Our experimental evidence further shows that US RA events also generate asymmetric emotion changes, which can be linked to unfamiliarity and explains 20% of the RA spillover asymmetry.

◘ Paper [UPDATED! 2023/01]   bib

◘◘ 2022 MFA (2022/03), 2022 AFA (2022/01), 2021 CIRF (2021/07), ECWFC @ WFA (2021/06), JABES seminar (2021/06), Fudan University Economics (2020/11), SAIF (2020/10), SMU (2020/11), Boston College Brownbag (2020/10), Washington University in St. Louis Brownbag (2020/10), WAPFIN @ Stern, New York (2018/09)

◘◘◘ winner of Boston College Research Expense Grant, 2018-2019

  [8] Risk, Monetary Policy and Asset Prices in a Global World

(with Geert Bekaert and Marie Hoerova)


We study how monetary policy and risk shocks affect asset prices in the US, the euro area, and Japan, differentiating between “traditional” monetary policy and communication events, each decomposed into “pure” and information shocks. Communication shocks from the US spill over to risk in the euro area and vice versa. Both monetary policy and communication shocks spill over to stocks, with euro area information spillovers being particularly strong. US spillovers are consistent with global CAPM intuition whereas euro area spillovers are larger. Importantly, we document a strong global component of risk shocks which is not driven by monetary policy.

◘ Paper [2023/07]   bib

◘◘ SAIF (2023/03), Florida Atlantic University (2023/02), University of Florida (2022/11), SUFE (2022/11) 2021 EFA (2021/08), 2021 EEA-ESEM (2021/08), 2021 CIRF (2021/07), 2021 CICF (2021/07), 2021 FIRS (2021/06), University of Alabama (2021/03), Bank of Spain (2021/03), BI Olso (2021/03), Florida International University (2021/02), 2021 AEA (2021/01), 2020 Annual Meeting of the Central Bank Research Association (2020/09), BI Olso (2020/08), University of Cincinnati (2020/03), 11th International Research Forum on Monetary Policy (IRFMP) (2020/03), MFA (2020/08), SNB-FRB-BIS High-Level Conference on Global Risk, Uncertainty, and Volatility (2019/11), 20th IWH-CIREQ-GW Macroeconometric Workshop: Micro Data and Macro Questions (2019/10), Conference on Advances in Applied Macro-Finance, Istanbul, Turkey (2018/12)

  [9] Global Risk Aversion and International Return Comovements

I establish three stylized facts about global equity and bond return comovements: Equity return correlations are higher, asymmetric, and countercyclical, whereas bond return correlations are lower, symmetric, and weakly procyclical. To interpret these stylized facts, I formulate a dynamic no-arbitrage asset pricing model that consistently prices international equities and bonds; the model features various time-varying global macroeconomic uncertainties and risk aversion of a global investor. I find that different sensitivities of equity returns (strongly negative) and bond returns (weakly positive or negative) to the global risk aversion shock can explain the observed comovement differences. Global risk aversion explains 90% (40%) of the fitted global equity (bond) comovement dynamics.


◘ Paper  Online Appendix  Replication   bib

◘◘ Annual Workshop on Investment- and Production-Based Asset Pricing, Olso (scheduled), 2020 AEA (2020/01), Stanford SITE "Session 8: The Macroeconomics of Uncertainty and Volatility" (2019/08), 2019 UBC summer conference (2019/07), University of Zurich (2018/12), University of Luxembourg (2018/12)London Business School (2018/09), 2018 E(uropean)FA (2018/08), 2018 CICF (2018/07), Boston College (Carroll), Cornerstone, Emory (Goizueta), Georgetown (McDonough), Goldman Sachs, Johns Hopkins University (Carey), University of California (Riverside), University of Minnesota (Carlson), University of Notre Dame (Mendoza), University of Oklahoma (Price), University of Southern California (Marshall), University of Wisconsin Madison, Finance Ph.D. Seminar, NYU Stern (2017/12), Finance Faculty Free Lunch, Columbia Business School (2017/11), Ph.D. Seminar, Columbia Business School (2017/10), Financial Economics Colloquium, Econometrics Colloquium, Columbia University (2017/10, 11), Federal Reserve Bank of New York, New York (2017/09)

◘◘◘ Dissertation Award, Federal Reserve Bank of New York, New York 2017

  [10] Forecasting International Stock Market Variances

(with Geert Bekaert and Tiange Ye)

We examine 320 different forecasting models for international monthly stock return volatilities, using high frequency realized variances and the implied option variance as the predictor variables. We evaluate linear and non-linear models, and logarithmic transformed and weighted least squares estimation approaches. A logarithmically transformed Corsi (2009) model combined with the option implied variance (“lm4 log”) is robustly, across countries and time, among the best forecasting models. It also survives tests using panel models and international variables. When alternative models (such as models including negative returns) have better performance, the forecasts they generate are extremely highly correlated with those of the “lm4 log” model.


◘ Paper  [New! 202405]  bib

Selected Work in Progress

       Growth Dynamics at Different Stages of Development

(with Geert Bekaert)

First draft coming soon. This paper characterizes growth rates at different stages of economic and financial development of 180 countries over 55 years (1960-2014). We present several static stylized facts. In particular, low development stage appears with high growth volatility and positive growth skewness, which is potentially caused by significant growth spurts in these country-years.

       Uncertainty Shocks and Personal Investment: Evidence From a Global Brokerage

        (with Rawley Z. Heimer and Shimon Kogan)

We use novel data from a global retail brokerage to study how shocks to uncertainty affect personal investment around the world. We consider three empirical uncertainty shocks that have been proposed by the literature — terrorism, natural disasters, and large stock price jumps. We then consider how within-country uncertainty shocks affect investment and delegation in global assets on the brokerage. Importantly, the within-country uncertainty shocks (e.g., a natural disaster in Spain) are unlikely to affect world asset fundamentals (e.g., the SPX500). This allows us to isolate the effects of uncertainty shocks on personal risk aversion from their effects on asset fundamentals. We find that uncertainty shocks have scant effects on personal investing. They primarily affect delegation to asset managers on the brokerage, but that the direction of the effects depends on the type of uncertainty shock. Investors increase their delegation by 5% following terrorist activity and reduce delegation by 8% following positive and negative stock market jumps. These findings suggest that the exogenous uncertainty shocks proposed by the literature have heterogeneous effects on individual investment.

◘◘ 2019 ANU-RSFAS Research Camp (2019/12), Boston College Brown Bag (2019/11)

◘◘◘ INQUIRE Europe Research Grant, 2020

       Home Bias Revisited 

(with Geert Bekaert, Sandra Wang, Stephan Siegel)


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